3) A SIMPLE MODEL OF MOVIE-LAUNCH TIMING Consider the following model of how movie studios might think about the optimal timing of launching a movie (and thereby entering a market). Suppose there are two studios (or movies), X and Y, and there are two holiday weekends, 1 and 2. In weekend 1, there is a total of 8 movie fans, evenly divided into regular moviegoers {A,B,C,D} and occasional moviegoers {E,F,G,H}. In weekend 2, there is a total of 8 movie fans, evenly divided into the same regular moviegoers from before {A,B,C,D} and new occasional moviegoers {I,J,K,L}. All fans want to watch movies (produced at zero cost) and the price per ticket is $1. How should we envision demand? Suppose that all moviegoers will watch a movie that they have not seen before, but will never watch a movie for a second time. Also suppose that if two previously-unseen movies are available, the customers will "flip a coin" and be split evenly, with alphabetically-earlier moviegoers choosing X and others choosing Y. E.g., if both movies are available in weekend 1, then A and B will watch X while C and D watch Y, and if both movies are still available in weekend 2, then A and B will watch Y while C and D watch X. A movie launched in weekend 1 is still available in weekend 2. a) Determine the total box office revenue (or profit) for each firm under each combination of launch weekends: (X enters in 1, b) c) Y enters in 1), (1,2), (2,1), and (2,2). TIP: Don't worry about discounting future payoffs; just add the two weekend revenues to find the total revenue for each firm. HINT: Complete the tables below! Find the pure strategy Nash Equilibrium for this 2x2 game of launch timing between X and Y. Intuitively explain the result. Critique this model. What positive things can you say about this model? What negative things can you say about this model? TIP: What seems unrealistic, overly optimistic, oversimplified, or missing from this model? Both X and Y Both X and Y Only X Both X and Y Wknd 1 Wand 2 Wknd 1 Wand 2 XXXX QUALI 120AHH AQUALSI Only Y Both X and Y Wknd 1 Whand 2 Neither Wknd 1 Both X and Y Wand 2 за глинопод XXXX AQUALSI 11 11 Firm Y 2 хилу DI 1111

M7

You like your job, but your boss gives lousy bonuses. You were recently offered a new job with better rewards and your friend wants to know if you intend to take it. You say, "It depends on whether the bonus this year is generous, Let's wait and see. We'll find out next week" The likely outcome of this game is your boss gives you a ousy :bonus and you ept the new job. If you want to stay at your current job and be better rewarded, you could improve your strategy if you: demand an increase in your bonus by a certain amount, but does not tel your boss about the job offer. adopt a dominant strategy to accept the other position and make this known to your boss. O tell the boss about the job offer you are prepared to take if your bonus structure does not increase by a certain amount. Cadopt a dominant strategy to stay at your current position and make this known to your boss.

You and a coworker are assigned a team project on which your likelihood or a promotion will be decidedon. It is now the night before the project is due and neither has yet to start it. You both want toreceive a promotion next year, but you both also want to go to your company’s holiday party that night.Each of you wants to maximize his or her own happiness (likelihood of a promotion and mingling withyour colleagues “on the company’s dime”). If you both work, you deliver an outstanding presentation.If you both go to the party, your presentation is mediocre. If one parties and the other works, yourpresentation is above average. Partying increases happiness by 25 units. Working on the project addszero units to happiness. Happiness is also affected by your chance of a promotion, which is depends on howgood your project is. An outstanding presentation gives 40 units of happiness to each of you; an aboveaverage presentation gives 30 units of happiness; a mediocre presentation gives 10 units…